One of the biggest financial burdens facing millennials today is the cost of college and subsequent student loan payments that come with a college degree. The latest studies show that the average college graduate in the year 2016 graduated with student loan balances of $37,172. That is a LOT of debt for a 21-year-old.
Similar types of studies done on retirement savings show that 1 in 3 Americans have ZERO saved for retirement, and 56% of Americans have less than $10,000 saved for retirement.
The debt problem is also a problem. Consumer debt loads are rising and people are once again struggling to pay their bills as they continue to depend on other peoples’ money to help them live their lives.
So the question becomes: How can I possibly help my kids pay for college when I’m dealing with lots of debt and/or haven’t even saved enough for retirement?
That, my friend, is the million dollar question, and I’m here today to help you answer it.
My Kids Want to Go to College, But I Need to Save for Retirement and/or pay off debt
It’s a common problem these days. Nearly 30% of Gen-Xers and 28% of Baby Boomers have saved NOTHING for retirement, yet these are the age groups that most commonly have kids heading off to college soon. So, how can they help their kids pay for college and yet still save for retirement? Here are some tips.
Retirement Saving is Top Priority
Friends, the likelihood is that no one is coming to rescue you financially during your retirement years. Your money woes aren’t going to magically “work themselves out” and a check probably isn’t going to just show up in the mail. Lottery and casino expenditures will cause you more financial harm than good and honestly, you can’t really count on social security at this point either.
I watched my grandparents struggle throughout their retired years with not enough to live on. Their children (most of whom were also struggling financially) helped them when they could but didn’t have much to give either.
Don’t do that to yourself. Don’t do that to your children. Make a commitment to be a blessing to your kids and grandkids by having your financial crap together. Make getting your own financial act together your first priority, and go from there.
And don’t fall for the lie that you will just never retire. You may not have a choice. Health problems (which also cost money) may force you into retirement, as may a crumbling economy or some other unforeseen incident. Plan on retiring, even if you think you won’t want to or be able to retire.
Start by Paying Off Your Debt
Debt payments are a surefire retirement plan killer, plus they’ll leave you little money to help your kids pay for college. The more debt payments you have, the more income you will need to survive during retirement and the less money you’ll have to save for retirement.
Pay off your debt – FAST. Use ruthless prioritization, stop spending money on stuff that truly holds no value to you and start making a serious effort to get out of debt. Use the debt snowball or refinance your current loans to get lower interest rates. Cut your expenses down to the bare bones and use the extra cash to eliminate your debt FAST. The sacrifice will be short term and be well worth the effort when you aren’t bondage to lenders anymore.
Don’t know where to start? Start here:
This four-part series will give you everything you need to begin paying off your debt.
Your Debt Freedom Plan: The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness
Save at the Same Time
Some experts recommend dumping all consumer debt before starting a savings plan. I disagree. If you’re behind on your retirement savings you need to start saving money for retirement now. If you don’t have an emergency fund you need to start contributing to one now. And you need to develop a habit of saving money now.
Participate in your company’s 401(k) program – especially if it has a matching plan – and/or start socking away just a little bit each month into an IRA, Roth or traditional.
The smartest retirement book: The Smartest Retirement Book You’ll Ever Read: Achieve Your Retirement Dreams–in Any Economy
You need to have the gift of compounding interest working for you, so start putting money away for retirement today, even if it’s only a small amount of money each month.
The same advice holds true for an emergency fund. If you don’t have one, commit to starting to save in one today – even if it’s only one or two percent of your take-home paycheck. Just start putting away something.
Helping Your Kids With College Costs
If you are making debt payoff and retirement savings your top priority, and you still want to help your kids with college, there is going to have to be some compromise on both sides.
- First, let your kids know the scoop. Be honest with them. Tell them that your finances aren’t what they should be but that you’ve put a plan in place to change that. Tell them that you want to make yourself financially strong so that you aren’t a burden to them when you’re older.
- Second, have a thorough discussion with them about their college plans. Make sure that each side knows what the other is planning and thinking. Be clear with them that you won’t be able to pay fully for college but that you want to help as much as you can while making your own financial journey a priority.
This book is full of awesome ideas for helping kids minimize college costs: Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents
3. Third, try and encourage them to minimize college costs for their own sake. Look into all options for schools. Encourage them not to choose a school just because their BFF is going there or because they want the status of the school name on their wall, but encourage them to be wise about costs and check out all options, such as:
- Checking out the prices of several different schools
- Searching out and applying for all available scholarships and other financial aid options
- Completing their first two years at a qualified community college and then transferring from there
- Reselling, instead of keeping, used textbooks to buy other things
- Living at home and going to a local school to cut down on costs
- Working to save as much as they can before they go to school to cover tuition costs
- Checking out colleges with a work program to offset tuition costs
4. Do what you can to help, whether that be allowing your college student to live at home rent free while in school, offering to pay what you can afford as you improve your own financial situation or helping them find and apply for scholarships. Some parents also get a second job for the sole purpose of putting that second job’s income toward a child’s tuition. Assess your own life and figure out how you can help your child without hurting yourself.
There are many ways to help your kids through college without putting your own self in financial jeopardy. The first and most important way you can help is by knowing your own financial situation and having a solid plan for getting it on track.
Don’t fall for the lie that college is a must, and that you as a parent are responsible for paying for your kids’ college costs.
Do your kids a favor and let the responsibility for that fall on them. One of the best gifts you can give your kids is to teach them that they have the physical and mental capability to figure out how to pay for college all on their own.